As we transition out of the pandemic, we are emerging into a world that looks a whole lot different from the one we knew in 2019. The pandemic was a tragedy, but it was also a laboratory experiment that accelerated many nascent trends waiting to bust out over coming years.
Ecommerce, delivery services, telehealth, work-from-home, virtual conferencing. The list goes on and on. The world was already pregnant with all of these concepts in terms of technological capability before the pandemic. But the needs we encountered accelerated the timeline for implementation and market acceptance as regulations stepped aside and demand for remote life blew up.
Now, here we are, left with a post-pandemic world operating with these new factors in the equation. Investors haven’t remotely unearthed the full ramifications of these revolutionary shifts at this point. The opportunities are still ahead of us.
One example that we will cover here today is in the repurposing of real estate in a world that no longer functions circa 2019, with separate work environments in leased offices, separate equipment owned from dealers, or time schedules managed on the nine to five.
The road ahead for real estate is likely to be consumed by flex space repurposing, distributing the former world’s commercial real estate market to companies able to offer a better deal for businesses, artists, content creators, and others who need the space and resources to create value without the constraints of long-term leasing arrangements or major equipment purchases.
It’s an emerging model that has disrupted the prior established model, and it’s not going away anytime soon. With that in mind, we look below at some of the most interesting opportunities that fit this emerging investment thesis.
WeWork Inc. (NYSE:WE) engages in the provision of flexible workspace solutions. It offers access to office spaces, internet connection, and other shared facilities.
The company was founded in 2010 with the vision to create environments where people and companies come together and do their best work. Since then, it has become one of the leading global flexible space providers committed to delivering technology-driven turnkey solutions, flexible spaces, and community experiences.
WeWork Inc. (NYSE:WE) recently announced that it is partnering with Clario, a leading healthcare research and technology company that generates the richest clinical evidence for pharmaceutical, biotech and medical device partners, to provide Clario’s workforce with WeWork All Access passes and flexible space across the United States, United Kingdom, Germany, Belgium, Hungary, and Costa Rica, giving colleagues even more flexibility with where they work.
“At Clario we believe our people are our most material differentiator. They define who we are and how we compete in the marketplace. Part of attracting and ultimately retaining talent like ours is to ensure we listen to what people value most. We have learned from countless surveys and feedback sessions that people want flexibility. They want time back, to better balance their personal and professional lives. How work is done has been changed by ever advancing technology and where work needs to be done has forever changed. Working with WeWork has allowed us flexibility to choose locations that fit our employee base. It has reduced travel time, improved work efficiency, and allowed our employees and Clario as a company greater overall flexibility. This partnership is one that we are truly excited about and look forward to the future,” said David E. Fusco, EVP, Chief Human Capital Officer Clario
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action WE shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -19% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -8%.
WeWork Inc. (NYSE:WE) managed to rope in revenues totaling $848M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 18.1%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($287M against $2.2B, respectively).
Sugarmade Inc. (OTC US:SGMD) is a new play in this space. It’s a more speculative stock trading on the OTC, but big things could be in store after the company announced this week that it has entered into a Binding LOI to acquire the real estate assets and businesses of Treasure Mountain Holdings and Victorville Treasure Holdings.
Real estate assets included in the LOI are the Hilton Garden Inn Palm Springs/Rancho Mirage and the Holiday Inn Victorville. Both are located in California and carry a combined value of $70 million. But the big story may be the company’s associated launch of TheMediaBox, a new state-of-art branded multimedia flex-makerspace concept targeting aspiring content creators.
Sugarmade Inc. (OTC US:SGMD) bills itself as a product and branding marketing company investing in operations and technologies with disruptive potential. Its latest move is intended to result in two new dynamic growth-oriented business entities: a legacy OTC company engaged in the legal cannabis marketplace and a new NASDAQ listed company involved in hospitality, entertainment, and multimedia flex-makerspace operations that holds significant real estate and other assets away from the “plant-touching” cannabis arena.
According to the release, TheMediaBox is a membership-driven multimedia production facility that offers a unique and innovative approach to flex space by providing a creative environment for individuals and groups to experiment, produce, and showcase various forms of media such as videos, music, graphics, animation and more.
The space is designed for hobbyists, educators, media enthusiasts, and professionals to hone their skills, connect with others, collaborate, and create compelling content. TheMediaBox generates revenue by collecting rent from its customers, as well as by offering value-added services such as state-of-art multimedia equipment, software, accessories, and multimedia education.
Sugarmade Inc. (OTC US:SGMD) CEO, Jimmy Chan, stated, “This deal will carry multiple synergistic elements and tremendous value creation. TheMediaBox is an idea whose time has come, and this is the perfect vehicle to launch it. We are embarking on a new chapter that stands to deliver significant value to our shareholders as we expand our asset base and revenue streams and diversify our model with an eye toward a major exchange listing.”
Stratus Properties Inc. (Nasdaq:STRS) engages in the acquisition, development, and management of real estate assets. It operates through its Hotel, Entertainment, Real Estate Operations, and Leasing Operations segments.
The Hotel segment manages W Austin Hotel and Residences. The Entertainment segment includes production studios and venues for live music, concerts, and private events. The Real Estate Operations segment pertains to the firm’s residential properties. The Leasing Operations segment offers office buildings and retail spaces.
Stratus Properties Inc. (Nasdaq:STRS) recently announced that it has secured financing for, and commenced construction of, Holden Hills, a new development comprised of 475 custom residences on 495 acres within the established Barton Creek community in southwest Austin. Stratus considers Holden Hills, which is the last remaining single-family project in the Barton Creek community, to be a crown jewel of its 30-plus years of residential development.
William H. Armstrong III, Chairman of the Board and Chief Executive Officer of Stratus, said, “We have a long history of navigating the Austin market and creating value in our properties across a range of economic environments. Holden Hills is a unique and beautiful property, and our focus on sustainability and wellness has been thoughtfully planned to capitalize on growing trends in consumer demand.”
Even in light of this news, STRS hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -5%.
Stratus Properties Inc. (Nasdaq:STRS) has a significant war chest ($77.3M) of cash on the books, which compares with virtually no total current liabilities. STRS is pulling in trailing 12-month revenues of $39.7M. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -13.8%.
Other key players related to this theme include AMC Entertainment Holdings Inc. (NYSE:AMC), Zoom Video Communications Inc. (Nasdaq:ZM), Howard Hughes Corp. (NYSE:HHC), St. Joe Co. (NYSE:JOE), and CuriosityStream Inc. (Nasdaq:CURI).
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